SPX ‘M’ Top and What Has Come After

This is the weekly chart of SPX and VIX that we used last year in NFTRH to plot a summer grind upward into what was projected as an ‘M’ double top situation. This was due to the unsustainable bearish sentiment that you can see portrayed by the February spike by the VIX in the lower panel. Our view was that this sentiment needed to be repaired before bearish ways could resume.

The thing eventually ground upward for a little longer and higher than I had anticipated, compelling me to label it a breakout – rather than the extended bull trap it was – with those 6 weeks (yellow oval) in blue sky in late summer. Anyway, a rather distorted ‘M’ eventually did come about and we adjusted immediately upon a loss of blue sky (back into the red box).

I’ve kept this chart in rotation in the Sentiment segment because of its VIX panel at the bottom. Last week the VIX curiously did not break down as SPX did break up. Yesterday VIX even put a little daylight between it and its support level at 17 +/-.

In an update yesterday morning we noted that despite what would be a coming red day SPX was above key support with the relief rally still intact, and wouldn’t you know they are manufacturing the happy stuff today in pre-market.

But unless they break the VIX down (there is a lot of hot air from 17 to 11) and unless several other factors we are watching flip, the stock market is indicated to be on a bear market bounce, fueled by short covering and relief by casino patrons. So for at least part of another day, party on Garth, they are serving free spiked punch at your local S&P.

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